Competitive Dialogue - a Northern Ireland Approach

Competitive Dialogue - a Northern Ireland Approach

Following the introduction of the new competitive dialogue procedure for PPPs, Stuart Cairns examines the approach being taken by the Sperrin Lakeland Trust.

Competitive Dialogue

On 31 January, 2006, the Public Contract Regulations 2006 became law in the UK (the "Regulations"). These Regulations replace, consolidate and enhance previous separate sets of Regulations for services, supplies and works contracts. One change has affected PFI/PPP in particular, namely the introduction of a wholly new procurement procedure known as the competitive dialogue procedure (CDP) for contracts considered to be "complex" in nature and where the contracting authority is "not objectively able to define technical means of satisfying its needs or objectives or to specify the legal or financial make-up of the project or both".

Before the introduction of CDP it was considered to be best practice to use the negotiated procedure for any form of PPP contract which was complex in nature and likely to involve discussion of contractual terms post-preferred bidder. Other procurement methods such as the restricted procedure (a "brown envelope" type of contracting procedure which prohibits negotiation of terms at any stage during the procurement procedure) were not generally used in any form of PPP procurement because of the practical need to negotiate. Since 31 January, however, it has been made clear both by the European Commission and the Office for Government Commerce that the negotiated procedure should only be used in the most exceptional of cases, for example the London Underground PPP. For all other complex PPP procurements, the CDP should be used.

In the absence of specific guidance on the approach to be taken to CDP (the Department of Health only released draft guidance on 18 October, 2006), the Strategic Investment Board and Northern Ireland's Health Estates developed an approach currently being piloted on the South West Hospital PPP Project. The key stages are:

• OJEU Publication: all interested parties are sent an information memorandum and a prequalification questionnaire.
• Commencement of Dialogue: once the evaluation of PQQ responses has been completed, a maximum of 5 bidders and at least 3 bidders are invited into the dialogue.
• Reduction to 3: in circumstances where more than 3 bidders are invited into the dialogue, a reduction is made to 3 by application of the award criteria.
• Dialogue: dialogue continues with all bidders until the needs and requirements of the Trust are certain. The preferred approach to development of the project agreement is for bidders to submit one mark-up and commentary encompassing the comments of all parties to their bid including funders and technical advisers.
• Formal Bids: when the dialogue is completed, final bids are invited.
• Evaluation and Award: upon receipt of bids, no further negotiation is permitted although the Regulations do permit contracting authorities to fine tune, clarify, specify and add. Preferred bidder status is awarded to the bidder who submitted the most economically advantageous tender.

Design

A key focus in the health sector locally has been on the design of the facility. To assist with this, and in an effort to reduce bidders' costs, an exemplar design is prepared by a design team working closely with the Trust. This design represents one solution but bidders are challenged to improve upon this. With this in mind, bidders are required during the course of the dialogue to submit various deliverables for assessment before feedback is provided. Broadly speaking these are: preliminary design concept, firm design proposal (including indicative costings) and finally, fully worked up drawings and a priced bid. Funding No formal funding competition in the manner currently being piloted by the Department of Health in England and Wales will be required on the SW Hospital Project. The effect of this is that funders will have to engage with bidders during the course of the dialogue to ensure that they can imput into, and influence, the development of the project agreement.

Early indications are that this new approach is being welcomed in the market. Four strong bidders prequalified for the SW Hospital project and keen interest is being shown in subsequent schemes.

Stuart Cairns is an Associate in the firm's Corporate Department specialising in the PPP sector. He is currently advising the Sperrin Lakeland Trust on the Enniskillen and Omagh Hospital PPP Projects. The firm has also been appointed to advise on the redevelopment of the Ulster Hospital at Dundonald following a tender and interview process.

Stuart can be contacted at: stuart.cairns@lestrangeandbrett.com

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